Last date to book loss

Tax queries 1357 views 4 replies

Piyal

None

54 Points Joined July 2009

Dear Members,

I trade in F&O only in NSE and I have loss of 5 Lac. I am told by trader friend that I need to file IT return showing a business loss (5 Lac) in ITR-4 format. I also told I need to keep books and get tax audit done due to the turnover which is above 40 Lac ( 2+ Cr buy and 2+ Cr Sell).

(a) Does section 44AB definition of turnover of calculating turnover amount as sum of profit and Loss apply to only day trading(speculative income) and not F&O trading (business income) ? How is turnover computed in scenario below?(8.5 Lac Loss, 3.5 Lac Profit, Net 5 Lac Loss...turnover = 12 Lac ? or 4 Cr - 2 Cr Buy and 2 Cr Sell ? )

(b) Is tax audit compulsary in scenario above?

(c) What is the last date for me to file the return if I need to carry forward the loss - is it Jul 31 (std date) or 30 Sep (since this is Tax Audit Case) ? I need to carry forward the loss to offset this years gains.

(d) If there is no time to complete the tax audit before 31 July (if this is the last date to register loss for carry forward purpose), what options exist?

Sincerely,

Piyal

Replies (4)

Niral Gangar

Management Consulting Investment Adviso

100 Points Joined February 2008

Answers to your question are as follows:

1) Section 44AB also applies to FNO trading.

The guidance note on tax audit issued by the Institute of Chartered Accountant of India (ICAI) has discussed the term ‘turnover’ as under: Transactions pertaining to derivatives (futures & options) are settled without the delivery of shares or securities. They are squared up by paying the difference. Contract notes are issued for the full value of the asset purchased or sold. But entries are made in the books of accounts only for the difference. In such transactions, the difference is the turnover. The aggregate of both positive and negative differences is to be considered as turnover.

If he transaction for the purchase or sale of any commodity / stocks / shares is delivery based, the total value of sales is to be considered as turnover.

Thus, for delivery-based transactions, actual selling price is treated as turnover, and for non-delivery based transactions, the difference, i.e., profit/loss arising on squaring up of the transaction is treated as turnover.

So in Your case Total of Profit + total of Loss i.e. Rs 8.5Lac + 3.5 Lac i.e. Rs 12 Lac is turnover

Hence No Tax Audit is required

3) The due date for filing Return of income in the above case is 31st July.

4) There are no options available to carry forward the loss if the return is not filed on time you will lose the benfit of set off. So atleast on notional basis you should file your return of income.

then on actual basis you can revise your return later.

Piyal

None

54 Points Joined July 2009

Dear Niral,

Thanks very Much, since very little time os left for Jul 31, your advice is very useful and helpful.

Can you please confirm and guide on below items.

(a) I will need to file the loss as a Non Speculative Business Loss

(b) Can you please suggest what will need to be put in the "Nature of Business" in ITR-4, PARTA-GEN section ? Code and Descriptttion

(c) Can you please send me link of the guidance note you are reffering to regarding turnover for section 44AB. I was able to locate the link for Accounting (www.icai.org/resource_file/11349p245-266.pdf)

Thanking You,

Piyal

Niral Gangar

Management Consulting Investment Adviso

100 Points Joined February 2008

I'm glad that my knowledge was useful to someone. The answer to your further queries are as follows:

a) Yes. it is ordinary business loss.

b) The code has to be 0204 - Trading - others

c) i dont have the guidance note in soft copy it is the Guidance note on tax Audit and calculation of turnover in hard copy. But i can send You certain links where expert have given a similar opinion:

/experts/experts_message_display.asp?group_id=122521
https://www.capitalmarket.com/Cmedit/story11-37.asp?SNo=144120
/forum/messages/2009/1/20387_future_and_options_trades.asp?quote=129789&